Taxability of corporate guarantees: prescribed valuation rule governs GST liability and invoice treatment for related party guarantees.
The issuance of a corporate guarantee by a related group entity is treated as a supply under GST even without consideration. Valuation issues persist, but the newly inserted sub rule 2 of Rule 28 prescribes a statutory valuation floor based on a prescribed percentage of the guaranteed amount or the actual consideration, whichever is higher, addressing cases where invoice-declared zero value is unavailable because the recipient lacks full input tax credit. Remaining questions include time-of-supply characterization, treatment of multi-year guarantees, scope of instruments covered, drawdown based valuation, and retrospective assessment risk. (AI Summary)